Sistema sets up $50 million fund to invest into start-ups

Sistema JSFC, a Russian conglomerate with over $10 billion of annual revenue, has jumped onto the Indian startup bandwagon. It has floated a proprietary $50-million (Rs 340 crore) Asia Fund to support Indian startups operating in the technology and niche consumer retail segments.

“The Sistema Asia Fund will start with an initial tranche of $50 million, which will be increased significantly in the near future once our startups financing business grows in India,” Sistema JSFC’s Group CFO Vsevolod Rozanov told ET. He declined to reveal the future size of the Asia Fund on confidentiality grounds.

Rozanov said the Singapore-registered fund would be advised by Insitel Services, the wholly-owned Indian unit of Sistema JSFC. Andrey Terebenin, an ex-Sistema JSFC executive board member, has relocated to India as senior managing partner of Insitel to oversee the advisory services function of Sistema Asia Fund.

“Sistema JSFC has an abundance of investible resources, and we realised funding startups could be a great way to leverage our knowledge about how business works in India by virtue of our presence in the telecom business, and also at a time when the Modi-led government is committed to galvanising the startups ecosystem,” said Rozanov.

Sistema’s decision to diversify into the Indian startup financing scene comes at a time when Anil Ambani-led Reliance Communications is taking over the Russian conglomerate’s Indian mobile telephony venture, Sistema Shyam Teleservices, which operates under the MTS brand.

In the first wave, Sistema Asia Fund will provide early-stage financing to startups who already have a revenue stream. “We will, typically, fund tech startups and others involved in innovative consumer-centric businesses aligned with the e-commerce/online retail model such as furniture leasing, food delivery to payment gateways,” said Terebenin.

He added that the fund will shortly close a couple of early-stage financing deals with Indian startups operating in its preferred domains.

Both Sistema JSFC executives, however, declined to confirm the potential ticket-size of such financing deals, but a person aware of the matter pegged it “upwards of $1 million each”.

Sistema Asia Fund will also support Indian startups in its preferred domains that are looking to expand into the Russian market.

“Sistema JSFC is open to taking on board limited partners, who would be co-investors in the Sistema Asia Fund,” said Rozanov. But once that happens, the Sistema Asia Fund would no longer remain a proprietary one, and would require a separate operating licence from the Singapore regulatory authorities.

Startup activity has been on a roll in the last couple of years in India, and has drawn the attention of big name investors from Silicon Valley and propelling valuations of several young companies in billions of dollars. But most of India’s startup successes have been around the world of technology or use technology as a key differentiator.

The Narendra Modi-led government recently unveiled the Startup Action Plan that promises no tax on profits for the first three years, no capital gains tax on assets sold to fund a startup, a self-certification-based compliance system for new firms, no inspection for three years and a single-point interaction hub. The prime minister also recently said his government would have a Rs 10,000-crore fund for startups.